Preventing German Bank Failures: Federalism and decisions to save troubled banks

Deo, Sahil; Franz, Christian; Gandrud, Christopher; Hallerberg, Mark

doi:10.5771/0032-3470-2015-2-159

Cited by 5 publications

(4 citation statements)

References 31 publications

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“…12 Incumbent politicians face a dilemma. They may want to assist banks in order to reestablish financial stability and bolster banks that are important for their local economies (see Deo et al 2015 andReinke 2014). They also face opposing pressures in terms of EDP enforcement, more expensive financing, and the possibility of being voted out of office for costly bailouts.…”

Section: Rules and Policy Choices During The Crisismentioning

confidence: 99%

Statistical agencies and responses to financial crises: Eurostat, bad banks, and the ESM

Gandrud¹,

Hallerberg²

2019

The Politics of Supranational Banking Supervision in Europe

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We demonstrate the important role that the European statistical agency-Eurostat-plays in shaping tools for responding to banking crises. From 2009, Eurostat used its position as the interpreter of member state budget statistical rules to implement increasingly stringent rules for how financial crisis responses would affect public budgets. Rather than mere technical details, these rules affected crisis responses. Elected politicians, and especially those under bailout programs, have strong incentives to minimise the direct budgetary effects of aiding failing financial institutions. By establishing and enforcing new rules about which crisis responses directly hit member state budgets and which did not, Eurostat created incentives to choose certain policies. We explore this process by examining the creation of bad banks and the European Stability Mechanism. Our paper makes an original contribution to both the study of the European banking union and the general role that statistical agencies can play in shaping crisis responses.

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Section: Rules and Policy Choices During The Crisismentioning

confidence: 99%

Statistical agencies and responses to financial crises: Eurostat, bad banks, and the ESM

Gandrud¹,

Hallerberg²

2019

The Politics of Supranational Banking Supervision in Europe

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“…These do not appear on the government accounts. They may, however, appear as formal government guarantees, or they may not appear at all in any reports, but they exist because one or more financial institution is considered by politicians as "too big to fail" and will receive public money if they get into trouble (see Deo et al, 2015). In principle, M is any possible contingent liability, which would include guarantees to state-owned enterprises, implicit guarantees to public-private partnerships, and future pension obligations (Brooks, 2009).…”

Section: Model: Choosing Transparencymentioning

confidence: 99%

Financial Data Transparency, International Institutions, and Sovereign Borrowing Costs

Copelovitch

Gandrud

Hallerberg

2018

International Studies Quarterly

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Conditionally Accepted for publication in International Studies Quarterly What explains variation in sovereign borrowing costs, and what role does information about the state of a country's financial sector play in the determination of those costs? Investors charge more interest when there are higher default risks. When estimating default risks, investors consider more than explicit public debt levels and include the risk that the financial sector poses to sovereigns in their calculations. Investors are more confident of their assessments when regulators release credible data on the shape and health of their financial sectors. Investors reward more transparent governments with lower sovereign borrowing costs. At the same time, we predict that the e↵ectiveness of transparency declines as public debt increases. Testing this argument requires a measure of transparency, so we create a new Financial Data Transparency (FDT) Index. The Index measures governments' willingness to release credible financial system data. Using the FDT and a sample of high-income OECD countries, we find that such transparency reduces sovereign borrowing costs. The e↵ects are conditional on the level of public indebtedness. Transparent countries with low debt have lower and less volatile borrowing costs.

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“…With the exception of state-owned Landesbanken (Deo et al 2015), the system has performed well. Sparkassen, cooperatives, and large banks have been vocal political advocates of keeping the system intact, and attacking EDIS as inferior for lack of supervision and commitment to institutional continuity.…”

Section: Germanymentioning

confidence: 99%

Advocacy coalitions and the lack of deposit insurance in Banking Union

Donnelly

2017

Journal of Economic Policy Reform

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This paper shows that advocacy coalitions surrounding the establishment of a European Deposit Insurance System lead to spillovers into incompatible areas. Alternative spillovers were to increased public backstops and state aid. Intent to minimize costs, Germany and the Netherlands have pushed for wide-ranging risk reduction measures: that go to the core of financial practices in southern Europe, while Italy has pushed for greater public backstops and state aid within EMU. Unable to break the deadlock in Council, the EU awaits Basel Committee guidance on how to deal with sovereign risk exposures in its 2017-2018 work program.

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Preventing German Bank Failures: Federalism and decisions to save troubled banks

Cited by 5 publications

References 31 publications

Statistical agencies and responses to financial crises: Eurostat, bad banks, and the ESM

Statistical agencies and responses to financial crises: Eurostat, bad banks, and the ESM

Financial Data Transparency, International Institutions, and Sovereign Borrowing Costs

Advocacy coalitions and the lack of deposit insurance in Banking Union

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